2014 - GlaxoSmithKline Pipeline Analysis (Kalorama)

Glaxo Smith Kline Pipeline Analysis
5th
GLAXOSMITHKLINE: PIPELINE
ANALYSIS
A KALORAMA INFORMATION MARKET INTELLIGENCE REPORT
GlaxoSmithKline: Pipeline Analysis has been prepared by Kalorama Information.

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Author: Melissa Elder
Publication Date: June 2014
Copyright © 2014 Kalorama Information, LLC.

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.
T A B L E O F C O N T E N T S
ONE: EXECUTIVE SUMMARY ..............................................................................1

Introduction ......................................................................................................................... 1
Scope and Methodology ...................................................................................................... 1
Glaxo Smith Kline Performance ........................................................................................ 3
TWO: INTRODUCTION ...........................................................................................1

Global Pharmaceutical Market .......................................................................................... 1
Top 25 Pharmaceutical Companies: An Overview .......................................................... 3
Global Healthcare Spending ............................................................................................... 6
Aging Population and Impact on Pharmaceutical Markets ............................................ 9
THREE: TRENDS IN PHARMACEUTICAL RESEARCH AND

DEVELOPMENT ......................................................................................................14
Pharmaceutical Research & Development Overview ....................................................14
Percent of Approvals .......................................................................................................15
Selecting Better Targets ..................................................................................................16
Top R&D Spenders .........................................................................................................17
The Pipeline Snapshot .....................................................................................................19
Expanded Options in Treating Diseases ..........................................................................24
Biotechnology Drug Development ....................................................................................25
Orphan Drugs ....................................................................................................................28
Fast Track Drug Status .....................................................................................................33
Other Accelerated Methods for Drug Approval .............................................................36
Breakthrough Therapy ....................................................................................................37
Pharmaceutical Regulatory Exclusivity ..........................................................................37
Pediatric Extensions ........................................................................................................38
Pharmaceutical Industry—Biosimilar (Biogeneric) Development and Exclusivity
Legislation ..........................................................................................................................39
Complications with Biosimilar Development ................................................................. 40
U.S. Exclusivity for Biosimilars .....................................................................................40
Biosimilars in Japan and China .......................................................................................41
Biosimilars in Europe ......................................................................................................41
Corporate Strategy: Mergers, Acquisitions, and Collaborations..................................42

Table of Contents
The Role of Contract Research Organizations ...............................................................44
FOUR: GLAXOSMITHKLINE PIPELINE AND MARKET ANALYSIS .........47

Overview.............................................................................................................................47
Financial Performance and Investments .........................................................................48
Geographic Market Participation ....................................................................................50
Pharmaceutical Business Performance ...........................................................................51
Leading Products .............................................................................................................54
Late Stage Pipeline ............................................................................................................55
Growth Strategy ................................................................................................................59

Table of Contents
L I S T O F E X H I B I T S
CHAPTER ON: EXECUTIVE SUMMARY.............................................................1

Figure 1-1: Global Pharmaceutical Market, 2011-2013 and Forecasted 2023 ............... 2
CHAPTER TWO: INTRODUCTION .......................................................................1

Figure 2-1: Global Pharmaceutical Market by Therapeutic Area, 2011-2013 and
Forecasted 2023 ................................................................................................................... 2
Table 2-1: Top Pharmaceutical Companies, 1-25 by 2013 Pharmaceutical Sales ......... 4
Figure 2-2: Top 25 Pharmaceutical Companies by Annual Pharmaceutical Sales
2013 ....................................................................................................................................... 5
Table 2-2: Total Healthcare Expenditures as a Percent of GDP by Country 2010 and
2012 ....................................................................................................................................... 7
Figure 2-3: Total Healthcare Expenditures as a Percent of GDP by Country 2010 and
2012 ....................................................................................................................................... 8
Table 2-3: International Population Trend Age 65+ ......................................................10
Figure 2-4: International Population Trend Age 65+ ....................................................11
Table 2-4: United States Population Trend Age 65+ ......................................................12
Figure 2-5: United States Population Trend Age 65+ ....................................................13
CHAPTER THREE: TRENDS IN PHARMACEUTICAL

RESEARCH AND DEVELOPMENT .....................................................................14
Table 3-1: Phases of Clinical Drug Development ...........................................................17
Table3-2:Top R&D Spenders in the Pharmaceutical Industry2011, 2012 and 201318
Figure 3-1: Top 10 R&D Spenders in the Pharmaceutical Industry,
2013 Comparison by Company .......................................................................................19
Table 3-3: Company Pipelines by Total Late Stage Development
Projects by General Therapeutic Segment .....................................................................21
Figure 3-2: Company Pipelines by Total Late Stage Development Projects................22
Figure 3-3: Company Pipelines, Leaders by Therapeutic Area ....................................23
Table 3-4: Orphan Drug Designations Granted and
Approved by the FDA 1983-2013 .....................................................................................32

Table of Contents
CHAPTER FOUR: GLAXOSMITHKLINE PIPELINE

AND MARKET ANALYSIS ....................................................................................47
Table 4-1: GlaxoSmithKline Corporate Summary ........................................................47
Table 4-2: GlaxoSmithKline: Total Company Revenue and
Total R&D Spending 2007-2013.......................................................................................48
Figure 4-1: GlaxoSmithKline: Total Company Revenue and Total
R&D Spending 2007-2013 ................................................................................................. 49
Figure 4-2: GlaxoSmithKline: Break-up of Sales by Region, 2013 ...............................50
Figure 4-3: GlaxoSmithKline: Pharmaceutical Business Performance,
2011-2013 and Forecasted 2023 ........................................................................................52
Figure 4-4: GlaxoSmithKline: Pharmaceutical Segment Sales
2011 through 2013 and Forecasted 2023 .........................................................................53
Table 4-3: GlaxoSmithKline: Leading Pharmaceutical Products, 2013 Sales .............54
Table 4-4: GlaxoSmithKline: Late Stage Product Pipeline ...........................................55
Figure 4-5: GlaxoSmithKline: Late Stage Product Pipeline by
Therapeutic AreaComparing 2009, 2011 and 2013 ...................................................58
Table 4-5: Highlighted Corporate Developments ...........................................................60

C H A P T E R O N E
Executive Summary
INTRODUCTION
The pharmaceutical market as a whole has witnessed a number of significant changes in
recent years, providing both setbacks and new opportunities. The number of blockbuster
pharmaceuticals reaching patent and exclusivity expiration status and vulnerable to generic
competition has changed the landscape of the market for many manufacturers. The growing
interest in biotechnology development has transitioned an industry once focused on chemical-
based therapies to biologic therapies and produced exceptional changes in many areas of medical
treatment over the last two decades. Companies such as Pfizer have been unable to ignore the
benefits of investing in biotechnology and have shifted its pipeline to focus on therapies in this
direction. Strategic acquisitions and partnerships with biotech companies have allowed
traditional pharmaceutical companies an opportunity to become diverse in pipelines and product
offerings. Companies like Amgen, which specialize in biotechnology, now compete with a
growing number of what the industry has once considered to be the traditional pharmaceutical
company, This is a trend expected to continue to grow as interest in the small biotechnology
focused companies continue to be acquired by the Pfizer's, Novartis' and Roche's of the industry.
SCOPE AND METHODOLOGY

For the purpose of this study, Kalorama Information has extracted sales for human
pharmaceutical, including biopharmaceutical products. The market excludes consumer
pharmaceuticals; diagnostics; devices; chemicals; agriculture; and animal health. These are areas
where many of these companies also compete with significant market shares.

One: Executive Summary
2
Also, despite an in-depth interview process and complete review of company financials
and literature, some variation in company rankings is possible. This is more likely with privately
held companies or companies where prescription pharmaceutical sales are not discussed.
This report provides long-term company sales forecasts which are based on 2013 market
conditions. Company forecasts were derived from a combination of pipeline analyses, current
product reviews, patent and exclusivity activities, recent merger and alliance impact, and a
number of other factors discovered throughout the writing of this report. In addition to specific
company data and factors, there are a number of macroeconomic concerns affecting sales such as
aging populations, incidence of disease, unmet medical needs, government activities, and more.
Although a thorough analysis and best effort has been made to provide a reliable market
forecast, changes can occur which would affect company sales forecasts, market
positions/shares, and overall market values. These may include a high-profile merger, a
promising late development project deemed not approvable, an unforeseen patent extension of a
high-sale therapy, a major production or manufacturing setback, or any other similarly
unpredictable events.
Figure 1-1
Global Pharmaceutical Market, 2011-2013 and Forecasted 2023
$1,000
$900
$ Billions - Pharmaceutical Sales
$800
$632 $725
$700 $645 $631
$600
$500
$400
$300
$200
$100
$0
2011 2012 2013 2023
Source: Kalorama Information

One: Executive Summary
3
GLAXO SMITH KLINE PERFORMANCE

Total pharmaceutical sales reached $33.5 billion for GlaxoSmithKline in 2013. The
company's currently holds a commanding position in the infectious disease and
respiratory/inflammation segments, which account for 33% and 38%, respectively. Oncology is
a focus area for the company in research and development as sales in this segment account for
less than 5% of total pharmaceutical sales for GlaxoSmithKline. The company currently has 15
projects underway in the oncology sector, more than any other segment. This attention to
oncology is expected to improve GlaxoSmithKline's position in the segment by 2023. Newer
therapies such as Arzerra are continuing to show growth in major regions and several pipeline
projects are underway to expand the use of Arzerra.
In the respiratory and inflammation segment GlaxoSmithKline will face generic

competition for its leading product Advair/Seretide but will likely offset some of the declines
with other products in its portfolio and several promising developments in its pipeline.
Overall, GlaxoSmithKline is expected to show an increase in sales through 2023,

reaching an estimated value of $37.3 billion. In addition to the late development projects
currently underway as shown in the pipeline table below, there are several promising phase II
developments that are expected to move to advanced development within the next two to three
years.

C H A P T E R T W O
Introduction
GLOBAL PHARMACEUTICAL MARKET

The global pharmaceutical market was worth approximately $632 billion (at the
manufacturer’s level) at the end of 2013. The market has continued its recovery from the
economic downfall experienced in recent years. In 2013, sales for pharmaceuticals increased
slightly over 2012. The largest therapeutic areas in medicine are:
x Cardiovascular Disease and Blood Disorders
x Neuroscience
x Infection
x Cancer
x Respiratory and Inflammation
x Others

Two: Introduction
2
Figure 2-1
Global Pharmaceutical Market by Therapeutic Area, 2011-2013 and

Forecasted 2023
Other Drugs
$800 Respiratory/ Inflammation
Oncology
Infection $725
Neurotherapeutics
$700 Cardiovascular/ Blood
$645
$631 $632
$209
$600
$195
$193 $191
$500
$103
Sales in Billions
$85
$400 $88 $92
$112
$70
$72 $76
$300
$83 $103
$85 $87
$200
$88
$83 $83
$82
$100
$123 $110 $115
$104
$0
2011 2012 2013 2023

Two: Introduction
3
TOP 25 PHARMACEUTICAL COMPANIES: AN OVERVIEW

The leaders in the pharmaceutical industry build a pipeline of products for a range of
indications. The products in development often portray the direction a company is heading
because the products are determined to be beneficial to patients and to the company’s
performance.
The top companies include pharmaceutical companies that are considered to be the top 25
companies worldwide in terms of generated revenues. Although some variation of ranking these
companies can be found, Kalorama Information has provided a ‘best-effort’ to rank these
companies from 1-25 by evaluating prescription pharmaceutical sales for 2013. This excludes
consumer medicines and products which are considered to be biologic but are classified as
devices, such as biosurgery products.

Two: Introduction
4
Table 2- 1
Top Pharmaceutical Companies, 1-25 by 2013 Pharmaceutical Sales

($ millions)
Position Company Pharma Sales 2013

1 Pfizer $47,878
2 Novartis 46,400
3 Roche 39,170
4 Merck & Co 37,437
5 Sanofi 37,133
6 GlaxoSmithKline 33,469
7 Johnson & Johnson 28,125
8 AstraZeneca 25,711
9 Eli Lilly 20,962
10 AbbVie 18,790
11 Teva 18,308
12 Amgen 18,192
13 Bristol-Myers Squibb 16,385
14 Takeda 16,000
15 Bayer 14,950
16 Novo Nordisk 14,880
17 Boehringer Ingelheim 14,600
18 Daiichi Sankyo 11,600
19 Astellas 11,550
20 Gilead Sciences 10,804
21 Otsuka 8,760
23 Actavis 8,492
22 Merck KGaA 7,900
24 Mylan 6,857
25 Baxter 6,397

$ in Milions
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$4
Pfizer 7,
87
8

$4
Novartis 6,
40
$3
9, 0
Roche 17
$3 0
7,
Merck 43
$3 7
7,
Sanofi 13
$3 3
3,
GlaxoSmithKline 46
$2 9
8,
Johnson & Johnson 12
$2 5
5,
AstraZeneca 71
$2 1
0,
Eli Lilly 96
$1 2
8,
AbbVie 7
5
$1 90
8,
Teva 3
$1 08
8,
Amgen 19
$1 2
6,
Figure 2-2
Bristol-Myers 3
Two: Introduction
$1 85
6,
Takeda 00
$1 0
4,
Bayer

95

$1 0
4,
Novo Nordisk 8
$1 80
4,
Boehringer Ingelheim 60
$1 0
1,
Daiichi Sankyo 6
$1 00
1,
Astellas 55
$1 0
0,
Gilead Sciences 80
$8 4
Ostuka Pharma ,7
6
$8 0
Actavis ,4
92
$7
Merck KGaA ,9
00
$6
Mylan ,8
57
$6
Baxter ,3
97
Top 25 Pharmaceutical Companies by Annual Pharmaceutical Sales 2013
Two: Introduction
6
GLOBAL HEALTHCARE SPENDING

The global healthcare industry is much larger than pharmaceuticals accounting for an
estimated $6.5 trillion, this is around 10% of the global GDP. In the U.S. alone healthcare
spending accounts for 18% of GDP, accounting for nearly $3 trillion.
Healthcare costs as a percent of GDP are increasing in almost all countries but there are
some exceptions. The European Union (E.U.) spends about 10% of the GDP in healthcare. As a
whole, the E.U. region has seen some of the smallest increases in healthcare spending. However,
spending on healthcare products and services often varies significantly by country, even in
neighboring countries such as among EU countries. In recent years, several countries have
attempted to reduce spending on healthcare, including France, Germany, Greece, and Italy;
however many countries are still reporting double-digit spending trends including Switzerland,
Germany, France, and Austria—each with about 11% of GDP in healthcare. The United
Kingdom (UK) healthcare market spends roughly 9.5% of GDP on healthcare.
South America, Asia Pacific and the Middle East are the smallest healthcare markets.
This can be attributed to the fact that the health systems in use are unbalanced in terms of
demand and supply, and are preventing many from meeting international goals centered on
health and poverty. Furthermore, the healthcare systems of many countries in these regions are
failing to deliver services of adequate quality, often using resources inefficiently or
inappropriately. However, these regions are experiencing more growth as their economies grow.

Two: Introduction
7
Table 2-2
Total Healthcare Expenditures as a Percent of GDP by Country 2010 and

2012
Country Total Health Expenditures as Percent of GDP

by Country
2010 2012
Australia 8.9 9.0
Austria 11.0 10.5
Canada 11.4 11.5
Czech Republic 7.4 7.5
Finland 8.9 9.1
France 11.6 11.2
Germany 11.6 11
Greece 10.2 9
Italy 9.3 9.5
Japan 9.2 9.3
Mexico 6.2 6.5
Switzerland 11.5 11
United Kingdom 9.6 9.5
United States 17.5 18
Source: Organization for Economic Cooperation and Development; U.S. Central Intelligence Agency;
U.S. Census Bureau; Kalorama Information

Two: Introduction
8
Figure 2-3
Total Healthcare Expenditures as a Percent of GDP by Country 2010 and

2012
United States
United Kingdom
Switzerland
Mexico 2012
Japan 2010
Italy
Greece
Germany
France
Finland
Czech Republic
Canada
Austria
Australia
0 5 10 15 20
Percent of GDP
Source: Organization for Economic Cooperation and Development; U.S. Census Bureau; Kalorama
Information

Two: Introduction
9
AGING POPULATION AND IMPACT ON PHARMACEUTICAL MARKETS

Around the globe, the aging population is expected to change the way the healthcare is
delivered. As people age they typically require more care and medicine. Essentially, the
increasing number of individuals in higher age brackets is expected to increase the demand for
healthcare.
The global population above age 65 is expected to grow by 279% between 2000 and
2050. The growth is showing the fastest increase from 2000 through 2020. The population in this
age group continues to increase beyond 2020 but the growth rate is expected to decrease to a
minor degree from 2020 to 2050.
In comparison, the total world population is expected to increase by 57% between 2000
and 2050 (6.1 billion to 9.5 billion).

Two: Introduction
10
Table 2-3
International Population Trend Age 65+

(Thousands)
Year World Population 65+ Compound Annual

Growth Rate
(CAGR%)
2005 474,095 2.23
2010 529,378 3.04
2015 612,666 3.53
2020 728,838 3.38
2025 855,411 3.25
2030 1,005,525 3.29
2035 1,171,052 3.09
2040 1,327,306 2.54
2045 1,457,801 1.89
2050 1,592,562 1.78
Source: U.S. Census Bureau International Database

Two: Introduction
11
Figure 2-4
International Population Trend Age 65+

(Thousands)
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
World Population 65+
In the United States the trend is similar. The growth in the 65+ age group is increasing
between 2005 and 2020. However, there is a larger increase between 2010 and 2015 than any
other period. The growth rate increases between 2005 and 2020, but decreases after 2020. The
number of people continues to increase over the period.

Two: Introduction
12
Table 2-4
United States Population Trend Age 65+

(Thousands)
Year U.S. Population 65+ Compound Annual Growth

Rate (CAGR%)
2005 36,752 .94
2010 40,229 1.82
2015 46,837 3.09
2020 54,804 3.19
2025 63,907 3.12
2030 72,092 2.44
2035 77,543 1.47
2040 81,238 .94
2045 84,456 .78
2050 88,547 .95

Two: Introduction
13
Figure 2-5
United States Population Trend Age 65+

(Thousands)
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
U.S. Population 65+

Three: Trends
14
C H A P T E R T H R E E
Trends in Pharmaceutical Research

and Development
PHARMACEUTICAL RESEARCH & DEVELOPMENT OVERVIEW

Pharmaceutical products are tested before they reach the market in many clinical trials
and studies. The process is used to test and confirm the safety and efficacy of medicines for
humans to use throughout a course of treatment. The testing process begins with preclinical
laboratory or animal tests. If a product moves from the preclinical phase, controlled clinical
testing is used to test a product on human volunteers. The testing process has five basic stages in
addition to gaining market approvals:
x Preclinical (laboratory testing)
x Clinical Phase I (initial human testing, focuses on safety)
x Clinical Phase II (tests for effectiveness and safety)
x Clinical Phase III (focus is on more complete testing in safety and effectiveness)
x Registration (marketing approval)
x Phase IV (post-marketing studies)
A new drug, often called an investigational new drug, is tested in phase I trials to
determine tolerability. Doses are minimal in this phase but doses can be increased to study how
the body processes the drug. The terms often used for body/drug interaction are

Three: Trends
15
“pharmacokinetics” and “pharmacodynamics”. Pharmacodynamics focuses on how a drug

affects the body. Pharmacokinetics focuses on how the body processes the drug. This phase tests
a product more often on healthy volunteers.
Phase II testing moves towards testing the product against a specific disease or condition.
More accurate dosages and the best routes of administration are determined. Additionally, data
concerning a product’s safety and possible risks are collected. A larger trial group (compared to
phase I) is used in phase II. Often several hundred-trial patients are studied in phase II.
Phase III testing is completed on the largest number of people. The data from previous
tests is used to continue the study of phase III products, as well as additional data collection for
safety and efficacy. Phase III testing is often double-blind, meaning the patient and the caregiver
do not know whether or not the trial participant is taking the active ingredient or a placebo. Some
studies also test multiple therapeutic products and a placebo.
Clinical trials require a considerable amount of resources so even if a product meets early
safety and efficacy criteria, a company may be unable to take a product to market because of
costs. Products that show promise may be pushed through development by investors and/or
interested third-party companies that see the benefits of a product.
The trial process uses volunteers that may drop out of studies if they wish to do so.
Government agencies and review boards monitor the trial process and they can cancel a trial as
well.
If a product is allowed to pass phase III, it moves to the registration process. This stage
allows health authorities to determine if a product is indeed safe and effective. In the U.S. this
agency is the Food and Drug Administration. Marketing a new drug in the U.S. requires a New
Drug Application (NDA) and in Europe, a Market Authorization Application (MAA) is filed
with the European Agency for the Evaluation of Medicinal Products (EMEA).
Upon receiving product approval, a manufacturer may conduct post-marketing studies, or

phase IV trials. This stage of testing provides additional data including long-term risks, and
benefits. Certain accelerated product approvals require phase IV testing.
Percent of Approvals
Drug approvals as a percent of drugs analyzed is decreasing. Estimates suggest the
number of approved products in traditional pharmaceutical research is approximately 1/2 of what

Three: Trends
16
it was 15 years ago. There are several strategies currently in place working to address this issue
and expand the success of compounds.
Selecting Better Targets

In 2014, the National Institutes of Health (NIH) introduced a large joint venture project
comprised of itself, FDA, 10 biopharmaceutical companies, and various non-profit organizations
such as the Lupus Research Institute, and Alzheimer's Association. The goal of the project is to
accelerate drug development by selecting better biological targets of disease. By working
together, the companies and industry organizations hope to reduce costs and increase available
therapies.
Companies are finding more disease targets using advanced research techniques, but if
the therapies fail in late-stage trials, it is usually very expensive. If better disease targets are
selected from the start, companies expect to develop more effective therapies and waste less in
lost R&D investment.

Three: Trends
17
Table 3-1
Phases of Clinical Drug Development
Clinical Trials
Preclinical File Phase I Phase II Phase III File FDA Phase IV
Testing IND NDA
Years 3.5 at 1 2 3 at 2.5 12 Additional
FDA FDA Total Post
Test Laboratory 20 to 80 100 to 300 200 to 3000 Review marketing
Population and animal healthy patient patient process / testing
studies volunteers volunteers volunteers Approval required by
Purpose Assess Determine Evaluate Verify FDA
safety and safety and effectiveness, effectiveness,
biological dosage look for side monitor adverse
activity effects reactions from
long-term use
Success 5,000 1-5 enter trials 1
Rate compounds approved
evaluated
Source: Pharmaceutical Manufacturers Association; Kalorama Information
Top R&D Spenders

Pharmaceutical companies spend significant resources in research and development
(R&D) activities. Even when comparing all industries, drug development companies are at or
near the top when comparing research expenses to total revenues.
Fluctuations in revenues, expansionary policies, and pipeline projects are all important
aspects of how much is spent in R&D. Companies with advanced development technologies
combined with the number of projects in development can push R&D spending to billions of
dollars and 15-20% of revenues each year.
For 2013, the top company in terms of revenues, Pfizer, isn't the top company in terms of
research spending. Roche spent the most on R&D with $10 billion allocated to this expenditure
for 2013. A close second is Novartis at $9.9 billion.

Three: Trends
18
Table3-2
2011, 2012 and 2013

Top R&D Spenders in the Pharmaceutical Industry
(in millions)
Position Company Total Company R&D Spending

(2013) 2011 2012 2013
1 Roche* 9,422 10,189 10,000
2 Novartis 9,239 9,332 9,852
3 Johnson & Johnson 7,548 7,665 8,183
4 Merck & Co. 8,467 8,168 7,503
5 Pfizer 9,074 7,482 6,678
6 Sanofi 6,700 6,307 6,334
7 GlaxoSmithKline 6,298 6,309 6,159
8 Eli Lilly 5,021 5,278 5,531
9 AstraZeneca 5,523 5,243 4,821
10 Bayer 4,083 3,874 4,236
11 Amgen 3,167 3,296 3,929
12 Bristol-Myers Squibb 3,839 3,904 3,731
13 Boehringer Ingelheim 3,503 3,594 3,500
14 Takeda 3,297 3,924 3,450
15 AbbVie 2,618 2,778 2,855
16 Daiichi Sankyo 2,345 2,214 2,220
17 Astellas 2,221 2,202 2,120
18 Gilead 1,229 1,760 2,120
19 Otsuka 2,017 2,328 2,100
20 Novo Nordisk 1,799 1,882 2,089
21 Merck KGaA 2,108 1,943 1,998
22 Teva 1,095 1,356 1,427
23 Baxter 946 1,156 1,246
24 Actavis 295 403 617
25 Mylan 295 401 508
*IFRS Data
Source: Company websites; Kalorama Information

Three: Trends
19
Figure 3-1
Top 10 R&D Spenders in the Pharmaceutical Industry, 2013 Comparison by

Company
15
14
13
Company R&D Spending in USD Billion
12
11
9.9 10.0
10
9 8.2
8 7.5
6.7
7 6.2 6.3
6 5.5
4.8
5 4.2
4
3
2
1
0
Bayer AstraZeneca Eli Lilly Glaxo Sanofi Pfizer Merck & Co. J&J Novartis Roche
Source: Company websites; Kalorama Information
The Pipeline Snapshot

Contributors to R&D success are rooted in having a pipeline with some breadth that
balances stages of development and high and low-risk projects, including innovative drugs and
follow-on products. Kalorama Information believes that pipeline quality can be improved by
rigorously assessing product candidates against financial expectations and objectives, market
analysis and input and high goals for advancing compounds.
Novartis, GlaxoSmithKline and Roche are the three leading companies ranked according
to R&D projects. Novartis has improved its research and development activities in recent years

Three: Trends
20
and is now 52 projects strong in late development. Novartis is concentrating on projects in the
areas of cancer, respiratory/inflammation and cardiovascular/blood products.
Many companies are building on their strengths in various disease areas. For example,
GlaxoSmithKline's pipeline is heavily focused on cancer, respiratory conditions, and infectious
disease.
Roche, including its Genentech division, has a pipeline of products heavily focused on
oncology. The driver right now is an aging population and producing lucrative long-term
therapies for conditions affecting older populations.
Focusing on blockbuster prospects is attractive but considered high risk. If they fall
through, there can be gaps in the pipeline; and if companies only advance products that have a
certain level of market potential, then a number of products that may have a greater chance of
survival may be killed. These are everyday decisions that product managers, R&D managers and
executives struggle with to make the correct decisions to advance the pipeline and bring valuable
products to market in a timely manner.
There are more projects for the treatment of cancers than any other therapeutic segment.
This is not surprising due to the unmet medical need in cancer, the numerous types of cancer and
complexity in treating the disease. Other major areas of therapeutic focus within the top 25
companies include neurological disorders; respiratory and inflammation; cardiovascular and
blood diseases; and infections.
The top 10 companies are the most successful in bringing a large number of projects into
late stage development. In total these companies—Pfizer, Novartis, Roche, Merck & Co.,
Sanofi, GlaxoSmithKline, Johnson & Johnson, AstraZeneca, Eli Lilly & Co., and AbbVie—have
287 projects in late development status.
However, there are some companies with a significant number of projects including
Takeda, Otsuka Pharmaceutical, Bayer, TEVA, Boehringer Ingelheim, Bristol-Myers Squibb,
Astellas, and Amgen.
Another significant finding and trend found in the development of this report is that many
of the companies with a large number of projects are located in Japan—an area focused on
innovative medical treatments.

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Table 3-3
Company Pipelines by Total Late Stage Development Projects by General

Therapeutic Segment
(Top 25 Companies by Revenues)
Company Therapeutic Segment Total

Cardio/ Neurotherapeutics Infection Cancer Respiratory Other Projects*
Blood and
Inflammation
Pfizer 3 7 2 8 3 3 26
Merck 3 2 7 3 3 4 22
Novartis 12 3 3 17 11 6 52
Sanofi 2 2 5 1 1 4 16
Roche 1 5 0 26 5 1 38
GlaxoSmithKline 2 1 8 15 11 6 43
AstraZeneca 4 2 3 11 5 10 35
Johnson & Johnson 3 3 5 14 2 3 30
Eli Lilly & Company 1 2 0 2 4 5 14
AbbVie 0 2 1 1 4 3 11
Bristol-Myers Squibb 2 0 8 9 0 1 20
Takeda 3 6 2 14 0 11 36
TEVA 2 3 0 2 5 2 14
Amgen 3 0 0 6 1 7 17
Boehringer Ingelheim 2 0 7 13 8 7 37
Bayer 8 0 3 8 0 6 25
Novo Nordisk 2 0 0 0 0 7 9
Astellas 1 3 4 4 1 9 22
Daiichi Sankyo 5 1 1 5 1 0 13
Otsuka Pharmaceutical 3 13 2 7 0 4 29
Merck KGAA 0 0 0 4 0 1 5
Gilead Sciences 2 0 5 3 0 0 10
Actavis 0 0 1 2 0 3 7
Mylan - - - - - - -
Baxter - - - - - - -
Total 64 55 67 175 65 103 529
* Includes late stage development as listed in company pipelines. There may be additional projects not disclosed.
- Not available
Note: may include multiple indications, dosages, and registered markets for single drug.
Source: company pipelines; Kalorama Information compilation

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Figure 3-2
Company Pipelines by Total Late Stage Development Projects

(Top 25 Companies by Revenues)
Pfizer
Merck
Novartis
Sanofi
Roche
GlaxoSmithKline
AstraZeneca
Johnson & Johnson
Eli Lilly
Abbott Laboratories
Bristol-Myers Squibb
Takeda
TEVA
Amgen
Boehringer Ingelheim
Bayer
Novo Nordisk
Astellas
Daiichi Sankyo
Ostuka Pharmaceutical
Merck KGaA
Gilead Sciences
Actavis
0 5 10 15 20 25 30 35 40 45 50 55 60
Projects

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Figure 3-3
Company Pipelines, Leaders by Therapeutic Area
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Respiratory/ Inflammation Other Therapy Areas

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EXPANDED OPTIONS IN TREATING DISEASES

An increasing elderly population in industrial nations over the next 25 years will be the
most important factor in the growing demand for therapies. The main causes of death are
cardiovascular disease, cancer, and respiratory disorders, all of which are strongly age-related.
Other age-related illnesses such as osteoporosis, arthritis, Alzheimer’s, and Parkinson’s are
major factors affecting quality of life. Mortality from cancer, diabetes, liver and kidney diseases
has hardly changed, offering significant areas for research breakthroughs. Cancer, poorly served
by traditional chemotherapies, is a major opportunity for biotech firms because the investment
needed to develop a cancer drug is lower than other diseases: the field has high priority with
regulatory authorities who are willing to give it fast track status on the basis of smaller (and
therefore cheaper) clinical trials (a few extra months of survival could be enough to win FDA
approval); the clinical community is highly concentrated; and the market size is often larger than
the approved indication because of a high off-label use (for other cancers). Infectious diseases,
the third most common cause of death in many geographic regions, highlight the pressing need
for new therapies with novel mechanisms of action to avoid growing issues affecting this
industry including a top area of concern—drug resistance.
Biological therapies have increasingly become the treatment of choice for many diseases.
Several hundred million individuals worldwide have been helped by hundreds of biotherapies.
Many of these areas of treatment have huge numbers of individuals affected each year while
other areas are small but growing due to the advancement in treatment and biotechnology in
general.
Primary areas of treatment for biologics include:

x Blood Disorder
x Anemia
x Hemophilia
x Neutropenia
x Thrombocytopenia
x Cancer
x Non-Hodgkin’s Lymphoma
x T-Cell Lymphoma
x Acute Lymphoblastic Leukemia
x Myeloid Leukemia
x Breast Cancer

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x Cardiovascular
x Myocardial Infarction
x Myoischemia
x Thrombosis
x Immune System Disorders
x Hepatitis B
x Hepatitis C
x HIV
x Organ Rejection and Sepsis
x Multiple Sclerosis
x Psoriasis
x Rheumatoid Arthritis
x Metabolic Disorders
x Diabetes
x Fabry’s Disease
x Gaucher’s Disease
x Mucopolysaccharidosis I
x Growth Disorder
x Respiratory
x Asthma
x Emphysema
x RSV
x Cervical Dystonia
x Neuropathic Ulcers
BIOTECHNOLOGY DRUG DEVELOPMENT

Pharmaceuticals are defined as any substance produced by natural organisms or
recombinant techniques consisting of proteins and other products derived from living organisms
for the treatment or management of diseases or injuries. Pharmaceuticals are created through
fermentation, recombinant DNA technology, and other bioprocesses.

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Virtually all biotherapy agents on the market are considered, in general, to be included as
pharmaceuticalswhich is simply any medically useful drug whose manufacture involves
microorganisms or substances that living organisms produce. Most biotherapies are
recombinant—that is, produced by genetic engineering. Insulin was among the earliest
recombinant drugs.
Genetic engineering, also known as bioengineering, gene splicing, and recombinant DNA
technology, comprises altering genetic molecules outside an organism such as inserting a
segment of a very different DNA molecule into another DNA molecule and making the resultant
DNA molecules (recombinant DNA) function in living things. Recombinant DNA technology
enables genetically gearing microorganisms, animals, and plants—giving them human genes, for
example—to yield medically useful substances, particularly scarce human proteins. In general,
recombinant drugs approved by the FDA are safer than comparable natural-substance
derivatives. For example, recombinant-DNA processes are precision techniques that inherently
limit contamination and many biological agents are identical to or differ only slightly from,
proteins in the human body.
Genetic engineering is central to the development of biologics. The history of

pharmaceutical biotechnology is not a new entity. Administering living things or biologic matter
is an ancient approach to disease. History details that crude biologic products were used in
China, India, and Persia. In 1928, Alexander Fleming’s discovery of penicillin in a common
mold and the subsequent development of antibiotics prompted by World War II injuries
necessitated large-scale manufacturing methods to grow the mold in huge tanks of broth. Hence,
antibiotics and insulin were originally both classified as biologics based on source and
production methods.
The split between drugs and biologics dates back to 1902 when Congress passed the
Virus-Toxin Law, four years before the Food, Drug, and Cosmetic Act brought drugs under
federal regulatory control. One of Congress’ first efforts to regulate therapeutic products, the
Virus-Toxin Law specified manufacturing, inspection, licensing and labeling requirements for a
growing new class of health care products known as biologics. This law became necessary when
a batch of contaminated diphtheria antitoxin killed several school children in St. Louis. The
equine blood used to prepare the antitoxin was contaminated with tetanus bacteria. In 1944, the
original Virus Toxin Law was revised and incorporated into the Public Health Service Act,
administered by the National Institutes of Health (NIH). NIH regulated biologics until 1972,
when its Division of Biologics Standards moved them to the FDA. The division was eventually

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renamed the Center for Biologics Evaluation Research (CBER), which has similar
responsibilities to regulate biologic products that the Center for Drug Evaluation and Research
(CDER) exercises over drug products.
The current definition of biologic in the Public Health Service Act seems clear stating “a
virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative,
allergenic product, or analogous product, or arsphenamine or derivative of arsphenamine (or any
other trivalent organic arsenic compound), applicable to the prevention, treatment or cure of a
disease or condition of human beings.” This seems straightforward in definition but it is anything
but settled in practice. In the world of product approvals, the line between biologics and drugs is
anything but clear. For example, gamma globulin is clearly a blood component or derivative but
that hasn’t slowed generic makers from entering the market. Over the years, CBER has approved
products that are clearly drugs, CDER has approved products that are by definition biologics and
both have approved products that are clearly medical devices. This has prompted territorial
infighting within the FDA over classification of products as drugs, biologics or devices. Drugs
versus biologic is more a legal and political distinction than a scientific issue. This blurring of
the class lines has allowed innovative manufacturers to guide their own regulatory and
commercial future.
In 1991, an agreement between the CDER and the CBER created a regulatory framework
for biopharmaceuticals. Prior to this resolution, all ethical products were reviewed by CDER.
Afterwards, drug molecules fell under the CDER domain, while products from living organisms/
tissues were governed by CBER. As part of the agreement, a dividing scheme was laid out,
which has been criticized for its complexity and lack of consistency.
Statutory guidelines are as follows:
x Drugs – new and generic drugs are approved under the Food, Drug
and Cosmetic Act and the Food and Drug Modernization Act. New
drug applications (NDAs) are filed under 505 (b)1, while
abbreviated new drug applications (ANDAs) for generics are filed
under 505 (j).
x Biologics – licensed under Section 351 of the Public Health

Service Act and in specific sections of the Food, Drug and
Cosmetic Act. To obtain marketing approval for a new biologic, an
applicant submits a biologics license application (BLA).

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Most of the biologic products on the market were approved under a biological license
application and were regulated under the FDA’s Center for Biologics Evaluation and Research.
However, in October 2003, the FDA switched many of the functions of CBER to CDER. The
consolidation of these review functions and personnel was expected to produce a more efficient
and effective review process for drugs and biologics by enhancing consistency and coordination
of the process. However there still are instances where the pathway for approval is unclear and
the growing development of biosimilar therapies has even further complicated the issue.
ORPHAN DRUGS
Pharmaceutical development over the past three decades has shown a substantial increase
in the number of drugs available to treat rare ("orphan") diseases. It is not surprising that this
increase has been directly attributable to Congressional passage of the Orphan Drug Act in
December 1982. After being signed by President Reagan in January 1983, the Orphan Drug Act
amended the Federal Food, Drug and Cosmetic Act, establishing for the first time the public
policy that the federal government could and would assist in the development of treatment for
rare diseases. Because many diseases and conditions, such as Tourette syndrome, amyotrophic
lateral sclerosis (ALS; Lou Gehrig's disease), and muscular dystrophy, affect such small numbers
of individuals in the United States, these diseases are considered rare under the Orphan Drug
Act. There is general agreement that the total number of patients afflicted with rare diseases is
significant.
Drugs and biological products to treat these diseases and conditions are commonly
referred to as "orphan drugs." Congress determined that adequate therapies for many rare
diseases had not been developed because pharmaceutical companies could not expect an orphan
drug to generate sufficient sales, in comparison to the cost of developing the drug, to realize
sufficient financial profit. Congress further resolved that it is in the public interest to provide
changes and incentives for the development of orphan drugs. During the 10 years before the
Orphan Drug Act was enacted, the American pharmaceutical industry had developed
approximately 10 orphan drugs without government support.
The 1983 Orphan Drug Act guarantees the developer of an orphan-designated product
multiple incentives including:

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x Seven years of market exclusivity following the market approval

of the product by the Food and Drug Administration (FDA) for use
in the same indication
x Tax credits up to 50% of qualified clinical research expenses

incurred in developing treatment for a rare disease
x Available funding from the orphan products grant program to

conduct clinical trials supporting the approval of drugs, biological
products, medical foods, and medical devices for rare disease
treatment.
The 1997 Food and Drug Administration Modernization Act exempted all orphan drugs
from application fees established by the 1994 Prescription Drug User Fee Act (PDUFA). This
represents a significant incentive for companies to sponsor marketing applications for orphan
drugs.
The Orphan Drug Act was amended in 1984 to define the term rare disease or condition
to mean any disease or condition which affects less than 200,000 people in the United States, or
affects more than 200,000 people in the United States, but for which there is no reasonable
expectation that the cost of developing a drug for such a disease or condition and making it
available in the United States will be recovered from United States sales within the subsequent
seven years from marketing.
The Office of Orphan Products Development, established by FDA within the Office of
the Commissioner in 1982, administers the incentives of the Orphan Drug Act. To obtain orphan
designation for a drug or biological product, a sponsor must submit an application to the Office
of Orphan Products Development prior to the submission of an application for marketing
approval of the product. Designation by the Office of Orphan Products Development is based
upon the information submitted by the sponsor, which must include a well-founded scientific
rationale for use of the drug in the specified disease, and data to support the prevalence of the
disease or condition in the United States. Orphan designation does not alter the standard
regulatory requirements for marketing approval.
The safety and efficacy of a designated product must be established through the conduct
of adequate and well-controlled studies. Since 1983, 456 orphan-designated products have
received FDA marketing approval.

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Although orphan products and disease indications are exceedingly wide-ranging, some
trends have emerged over the past 20 years. Approximately 85% of orphan designations are for
the treatment of serious and/or life-threatening diseases. The highest percentage (more than 30%)
of orphan designations are for rare forms of cancer, such as ovarian cancer and hairy cell
leukemia; while metabolic disorders represent the second largest group of orphan designations
(11%). The majority of rare diseases are chronic; however a small number of products are
developed for single-occurrence diseases or emergency medicine such as acute smoke inhalation
or lead poisoning. Approximately 50% of approved orphan products are for pediatric use.
Several barriers to orphan drug development concern difficulties in carrying out

statistically sound clinical research. Often, there are too few patients to easily demonstrate
efficacy. Patients are often dispersed throughout the country, and great efforts (and money) are
required to bring them into referral centers. The small number of patients also affects the
evaluation of different dosage and frequencies. Furthermore, study designs, especially parallel
double-blind placebo-controlled trials, may be extremely difficult with the few patients available
for study. Other factors that must be considered include the life history of the disease, and the
fact that there may be no treatment available for patients other than the study drug. Safety may
be incompletely characterized because of the small number of subjects.
Even though the occurrence of a disease is uncommon, the parameters for approving a
drug to treat the disease are the same as for more common diseases. FDA clinical testing
requirements are designed to determine the effectiveness of the drug, and its safety to patients.
There has been some need for the FDA to provide sponsor assistance in order that studies may be
designed that are adequately controlled to show safety and efficacy with small numbers of
patients. Rather than the formal (written) protocol assistance stipulated in the Orphan Drug Act,
most of this assistance currently is provided during pre-Investigational New Drug, as well as end
of Phase I/Phase II, meetings with the respective review division, the sponsor, and the Office of
Orphan Products Development.
The Office of Orphan Product Development does not have a role in the actual review of a
product for approval; however, it works together with the sponsors of orphan products and the
FDA Center for Drug Evaluation and Research and Center for Biologics Evaluation and
Research-the areas of FDA that grant drug approval. Requirements for clinical trials to determine
the safety and effectiveness of rare disease treatment are established by the FDA review
divisions. Staff members in the FDA review divisions provide constructive feedback and

Three: Trends
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assistance to drug sponsors, and negotiate to determine primary study endpoints prior to Phase 3
trials.
The most desirable clinical trial design is always a randomized, placebo-controlled

double-blind study. In double-blind trials with placebo control, one group of patients receives the
test medicine and another "control" group receives an inactive substance; neither the patient nor
the investigator is aware of which treatment the patient receives. Due to the nature of
investigating rare disease treatment, sponsors may utilize open protocol, open label, historical
control, or crossover trials. Surrogate endpoints may also be used in the investigation of orphan
products
There are a number of products in Phase III clinical development that have received
Orphan Drug status from the FDA. The success of the Orphan Drug Act is far greater than
anticipated and continues to encourage manufacturers to develop treatment for rare diseases.
Orphan Drug Act incentives have significantly affected the United States economy, with the
growth of successful new firms dedicated to the development of drugs for rare diseases. For a
more in-depth look at the orphan drug market, Kalorama Information's The World Market for
Orphan Drugs provides a comprehensive analysis of this market in the U.S. and other key
markets.

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Table 3-4
Orphan Drug Designations Granted and Approved by the FDA

1983-2013
Year Total Designations Granted Approvals
Prior to 1983 4 9
1983 1 2
1984 39 3
1985 50 7
1986 33 6
1987 58 9
1988 72 9
1989 77 11
1990 89 11
1991 81 13
1992 55 14
1993 65 13
1994 59 11
1995 57 11
1996 57 25
1997 53 18
1998 67 20
1999 78 20
2000 70 13
2001 79 6
2002 64 14
2003 96 12
2004 133 13
2005 124 18
2006 141 24
2007 119 16
2008 165 14
2009 165 20
2010 195 14

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2011 203 25
2012 190 25
2013 260 30
Total 2,999 456
Source: Food and Drug Administration; Kalorama Information
FAST TRACK DRUG STATUS

With the passage of the Food and Drug Administration Modernization Act (FDAMA),
existing programs for expedited development and approval for treatments of serious or life-
threatening diseases were recognized and consolidated under the administrative umbrella of fast
track product designation. The four basic programs available with fast track designation have
been categorized by FDA as consisting of:
x Meetings
x Written correspondence
x Review programs
x Dispute resolution.
Despite some early skepticism by the pharmaceutical industry, and even the FDA, that
the benefits of designation were not readily apparent since the individual programs are generally
available without designation, there are indications that fast track designation will be the
improvement Congress intended.
Unlike the individual expedited development and approval programs, which affect only
part of the drug development timeline, fast track designation has the potential to facilitate the
entire process. Industry requests for fast track designation have dwarfed pre-FDAMA industry
participation. Yet, the best predictor of the future success or failure of fast track designation is
how well it is working now. One of the primary goals of the fast track provision of FDAMA was
to expand the scope of expedited review and approval programs beyond treatments for AIDS and
cancer to any treatment for serious and life-threatening diseases. Before FDAMA, two-thirds of
the fast-tracked products were treatments for AIDS/HIV and cancer, and only one-third were for
all other diseases. A review of the indications from the products in a survey sampling frame

Three: Trends
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demonstrated a trend in the direction hoped for by Congress. Half of the indications were for
AIDS/HIV and cancer, while the other half were for a variety of other diseases and conditions
such as systemic lupus erythematosus, bypass surgery complications, hemolytic-uremic
syndrome, sickle-cell anemia, Crohn's disease, amyotrophic lateral sclerosis, rheumatoid
arthritis, and pneumococcal lung disease.
Another goal of the legislation creating the new fast track designation was to build upon,
and presumably improve, the existing FDA fast track programs. One way that this could occur
would be through participation of sponsors early in the development process. Survey results
showed a positive trend in that direction because close to half of survey respondents had
requested designation during Phase II or earlier. This also thwarted some of the early criticism of
fast track as benefiting only the late stages of development. Improving the program, of course,
does not mean putting up additional roadblocks on the path to development and approval.
Congress was mindful of this when it set a low threshold for eligibility with permissive criteria
language such as "intended to treat" and "potential to address." The FDA has conducted the
program so far according to the spirit of the law. The FDA requires that fast track designation
requests contain a plausible demonstration of the products' potential and emphasizes that
requests should not be voluminous. More than half of survey respondents were able to prepare
their requests in less than the time initially estimated by the FDA. The FDA has also been able to
approve three-quarters of respondents' designation requests within two months.
However, there are some statistics that are not favorable for granting fast tract status to
drugs. Out of a total of ten drugs which were withdrawn from the market from 1997 to 2000,
seven had been approved on a fast-track basis. In the majority of these seven cases, it is at least
questionable whether they were intended for life-threatening or serious disorders Drugs
withdrawn from the market, which had been approved on a fast-track basis include:
x Propulsid - The purpose of this drug is to ease night-time

heartburn. It was approved in July 1993. Although six children had
died during clinical trials, it became the drug predominantly used
on children in the first 12 months of their lives. By early 2000 the
medicine was linked to over 300 deaths, many of them children.
The drug had disturbed cardiac function. It was withdrawn in
March 2000.
x Redux - Redux was approved in April 1996. It was a diet pill

which was closely related to the slimming cocktail Fen/Phen.

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Many patients who took these pills eventually suffered from

pulmonary hypertension or heart valve damage. Furthermore, the
drug was linked to 123 deaths. It was withdrawn in September
1997.
x Rezulin - This was a diabetes drug which was given the go-ahead
in January 1997. After first reports of liver damage, it was
withdrawn from the British marketing December 1997. At the
time, the FDA was satisfied that the manufacturer changed the
language used in labeling. Labeling was changed twice again
before the drug was finally pulled from the US market in March
2000. Reports indicate that the drug may have been responsible for
the deaths of almost 400 people.
x Posicor - The FDA approved this medicine in June 1997 to treat

high blood pressure and related chest pain. It is alleged that 143
patients had already died during clinical trials. Nonetheless the
drug was approved in the USA, but not in other countries, such as
Sweden. Around 100 patients are said to have died after taking the
medicine before it was withdrawn in June 1998.
x Duract - This drug was approved on 15 July 1997. It was a simple

painkiller. Following indications that the drug would cause liver
damage if taken for a period of more than ten days, the label was
changed in early 1998. When the drug was finally withdrawn in
June 1998, it was connected to the deaths of 68 people.
x Raxar - This was an antibiotic approved in November 1997 for

treating bronchitis, pneumonia, etc. When it was withdrawn in
October 1999, a total of 13 people had reportedly died as a result
of heart problems which were very similar to those caused by
Propulsid.
x Lotronex - After agreeing to a fast-track approach in July 1999, the

FDA approved this drug in February 2000. It was primarily
administered to women against so-called irritable bowel syndrome.
By October 49 cases of a certain form of colitis had become

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known, a side effect caused by inadequate blood flow to the colon.

The drug was taken from the market in November 2000.
As a result of this activity and numerous others, the FDA is now taking a more cautious
approach following the growing number of recalls and is becoming more demanding in the
approval process.
OTHER ACCELERATED METHODS FOR DRUG APPROVAL

“Accelerated approval” and “priority review” are two other regulatory designations for
drug products. Accelerated approval was instituted by the FDA in 1992. It allows earlier drug
approval for medicines that treat serious illnesses and that fulfill an unmet need based on a
surrogate endpoint. This surrogate endpoint is a measurement of an outcome that may be
measured in a laboratory. This can considerably reduce the amount of time it takes to bring a
drug to market.
The FDA still requires that clinical trials support the evidence that shows an
improvement of a specific endpoint. Phase IV, or post marketing studies also have to verify that
the treatment of a surrogate endpoint is actually providing a real clinical benefit. For example,
the FDA may approve a cancer drug if it shows that it shrinks tumors, because it is a likely
precursor to a clinical outcome. Waiting to see if patient’s life is extended can take a long period
of time and the typical phases of development may restrict patients from having a beneficial
treatment. For this situation, phase IV trials have to confirm that the tumor shrinkage (surrogate
endpoint) translates to patients living longer (real clinical benefit). After the confirmatory trial,
the FDA can approve a product in the traditional manner, or if it doesn’t meet the requirements
for efficacy, the FDA can pull it from the market.
In 1992 the FDA also established a system that classifies drug reviews into Standard
Reviews or Priority Reviews. This was allowed under the Prescription Drug User Act (PDUFA).
A standard review is applied to products that only offer a minor improvement over currently
marketed products. In 2002, modifications to PDUFA set a time limit of ten months for new drug
standard reviews.

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Priority reviews are granted when a product offers significant advances in treatment over
existing therapies. This may also be applied when there is no “adequate” existing therapy. The
amount of time that is allowed for a priority review is six months. This means that the FDA
spends more resources on the approvals for priority products.
Manufacturers that wish to prove a significant benefit can demonstrate this by: proving
increased effectiveness; removing or reducing treatment-limiting drug reactions; providing
evidence that a product is safe and effective in a subpopulation; and a documented enhancement
in patient’s willingness or ability to take the drug according to the dosage requirements. The
FDA does not assign priority review; it must be requested by the drug company. The FDA has 45
days to assign a review designation.
Breakthrough Therapy
A breakthrough therapy designation can also be granted by the FDA for products
intended for the treatment of serious conditions and early evidence suggests that the drug may be
a significant improvement over available therapy. The difference between this and the fast track
designation lies in what must be demonstrated when applying for the programs.
A breakthrough therapy designation is eligible for:
x All Fast Track designation benefits
x Intensive guidance on an efficient drug development program, beginning as early

as Phase 1
x Organizational commitment involving senior managers
The FDA expects to receive breakthrough therapy designation requests no later than the
end-of-phase-II meetings and will respond to requests within 60 days.
PHARMACEUTICAL REGULATORY EXCLUSIVITY

Regulatory exclusivity is granted in some markets, including the U.S. and Europe.
Pharmaceutical drug exclusivity is often granted for several years, which can be a large boost to
the profitability of a drug. It limits generic competitors from gaining market approvals for like

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products, but this type of exclusivity is not based on a patent. The generic companies essentially
use clinical trial data and safety information, which is proven by an already marketed product, in
gaining generic drug approval.
New products that have regulatory exclusivity typically earn much more revenue for the
manufacturer/developer, for the limited period of time. This period for earning a return on
investment (ROI) is granted by a regulatory body in order to make innovative medicines more
feasible and profitable.
In the U.S. the FDA enforces exclusivity by withholding an approval for a generic until
the period of exclusivity for the branded product has expired. FDA exclusivity is typically five
years, however the FDA accepts Abbreviated New Drug Applications (ANDAs) with a patent
challenge up to one year before the exclusivity period expires.
New products that are granted exclusivity may also gain extended exclusivity for line
extensions. For example, if a product is approved for an original indication, but proven safe and
effective for a second significant indication, it may have up to three years of added exclusivity.
Another method of extending exclusivity is through pediatric extensions—gaining approval for
pediatric use.
The E.U. also has a method of granting exclusivity for new drugs. There is “data
exclusivity” which limits a generic application for eight years after the first approval. The second
type of exclusivity is “marketing exclusivity” which does not allow marketing of a generic for 2
years after the data exclusivity. Like in the U.S., exclusivity can be extended by gaining new
significant indications during the data exclusivity period. Companies report that although E.U.
exclusivity is granted it may not be followed by all member countries consistently.
Japanese exclusivity is granted on a scale from four year to ten years based on the drug’s
composition and if it achieved an orphan drug designation. Medicinal products that have new
indications can earn exclusivity for four years, and new chemical entities can be marketed
exclusively for up to eight years unless they are orphan drug products, which can have ten years
of exclusivity.
Pediatric Extensions
Under certain conditions, a product can gain extended exclusivity if the drug company
proves that it is safe and effective for pediatric populations. The FDA may request that pediatric

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studies be completed if it is expected to be beneficial. If the exclusivity period hasn’t lapsed and
the drug companies fulfill requirements for pediatric approval, the exclusivity period in the U.S.
may be extended by six months.
The pediatric exclusivity process in Europe can provide an extension of patent protection
for patented drugs or pediatric marketing extension for off-patent products.
PHARMACEUTICAL INDUSTRY—BIOSIMILAR (BIOGENERIC)

DEVELOPMENT AND EXCLUSIVITY LEGISLATION
In March 2010, President Obama signed into law The Patient Protection and Affordable
Care Act (PPAC Act). This Act amends the Public Health Service Act (PHS Act) effectively
creating an abbreviated approval pathway for biosimilars. Within the PPAC, the Biologics Price
Competition and Innovation Act (BPCI Act) provides further details about biosimilar products.
The FDA continues to meet with product developers to assist in the oversight of
biosimilars. The Biosimilar User Fee Act of 2012 (BsUFA) amended the Federal Food, Drug,
and Cosmetic Act (FD&C Act) to authorize a new user fee program for biosimilar products.
Sponsors or drug developers must pay a biosimilar biological product development fee
(BPD fee) to participate in the FDA’s BPD program. As part of this fee, developers receive a
BPD meeting for a product. These meetings are designed to discuss the format of applications,
data analysis, study design/endpoints, and other specific issues concerning product development.
The FDA has reported that, like the Hatch-Waxman Act, the approval of biosimilar
products may take "appropriate-reliance" on approved products thereby reducing unnecessary
human and animal testing. The biosimilar products must have no clinically meaningful
differences in terms of safety, purity and potency. There are allowable differences in clinically
inactive components. The FDA requires companies to demonstrate that their biosimilar product
produces the same clinical results as the reference products and that the patient may switch to a
biosimilar without increasing risk.
Manufacturers and drug development sponsors have reported that the 505(b)(2) pathway,
a type of new drug application (NDA), is an applicable method of submitting a drug for approval
that relies partially on a reference (approved) drug. This approval process applies if the sponsor
can prove that the new drug is as safe and effective as the approved product.

Three: Trends
40
Unlike small-molecule drugs, which are synthesized using chemical methods, most
biologics are highly complex proteins grown in living systems (some consisting of several such
components). Some of them are actually produced in mammalian cells from DNA that has been
modified to cause the expression of substances unique to humans rather than to, say, the mouse
in which the essential agent was originally isolated. The final product cannot be described in
simple terms. Most of these products are far too complicated and varied for a simple test to
determine whether the outputs from two different facilities are bioequivalent or will at least have
identical therapeutic effects.
As technology advances, however, the ability to make such determinations will become
more feasible for a growing portion of the biologic world. However, other more obscure
processes, such as protein folding, which can strongly alter a biologic's effect in the body,
provide additional challenges to regulators.
Legislation to provide a streamlined pathway for the FDA to approve lower-cost

biopharmaceuticals is backed by many organizations includes AARP, GPhA, GM, Caterpillar,
the Consumer Federation of America, and AFL-CIO. New regulatory structure allows the
approval of applications for drugs that are comparable to and interchangeable with an innovator
product.
Complications with Biosimilar Development

Pharmaceutical innovators are making considerable sales on some of the approved
biologics which makes them a natural target for generics, but the development of biosimilars isn't
as easy as with small molecule drugs. Regulatory hurdles as well as production issues are
complicating development of biosimilars which is expected to support some of the continued
development of innovative biologics, at least for now.
Because of costs and complexity of biosimilar development, large generics developers

like Teva may find less competition when launching biosimilar products. Generics developers
generally thrive off of low development costs and low margins but if biosimilars support larger
margins than small molecules, the expected payoff is expected to support their development.
U.S. Exclusivity for Biosimilars

In the U.S., a competitor may file an application for a biosimilar product four years after
the approval of the original product. Even though the FDA can accept applications for

Three: Trends
41
biosimilars it cannot approve them until a 12 year exclusivity period expires. This generally will
not stop generics developers from challenging patents and filing new product applications early.
Generic product developers have continued to target the basic patents filed by drug innovators
which is an ongoing trend in the industry. Because of this, innovative biologic exclusivity isn't
always as predictable as following a 12 year exclusivity period.
In the U.S. biosimilar products may be launched under a Biologics License Application
(BLA) or filed prior to the introduction of legislation. Sandoz applied for FDA approval for its
generic somatotropin, Omnitrope in 2004. On September 2, 2004, Sandoz announced the FDA
had notified the company that it was unable to reach a decision on whether to approve the
company’s application for Omnitrope. The FDA was reluctant to act on the approval and Sandoz
filed a lawsuit against the US Food and Drug Administration. The product was finally granted
approval and introduced to the European and U.S. markets in 2007 and is technically the first
follow-on product to receive approval. However, the FDA was quick to say that this did not
establish precedence for generic approval of biologics.
Biosimilars in Japan and China

Like the E.U., Japanese regulators treat biosimilar exclusivity like small molecule
products. There is generally an eight year exclusivity period and companies report that patents
for pharmaceutical products are enforceable. Patents for medicinal products may be extended for
time lost during regulatory review, similar to the U.S.
Chinese regulators grant exclusivity for medicinal products for six years. There is
generally no variation for biologics. Patent enforcement and counterfeiting continue to be a
concern for companies but the country is attempting to improve its system.
Biosimilars in Europe
Biologics and chemically-synthesized drugs generally fall under the same regulatory
umbrella in the E.U. The number of years of exclusivity starts at eight, but it may be extended to
11 years if the innovator gains an approval for an additional indication. The E.U. approval
process for biosimilar products was started in 2003 and adopted in 2005.

Three: Trends
42
CORPORATE STRATEGY: MERGERS, ACQUISITIONS, AND

COLLABORATIONS
Despite the new approaches, new technologies and a wealth of new information, drug
R&D is still challenged by understanding exactly how drugs will work and why they may fail.
Target validation remains a quandary as well. Thus the hurdle of getting past Phase III trials and
launching more NMEs continues. In order to overcome this, many large pharmaceutical entities
have turned to smaller drug discovery firms.
The biotech industry is generally thought of as the leading source for innovative drug
products. New biologic drug approvals have been climbing for the past 10 years and have been
making up a larger portion of all drugs approved. Some of the major mergers and acquisitions in
the last year have been from transitioning pharmaceutical companies that want to take advantage
of leading biopharma businesses. For example, Pfizer acquired Wyeth in October 2009. The
acquisition was part of Pfizer’s shift towards a broader, more competitive biopharma company.
Pfizer continues to develop small molecules but sees the potential in significantly increasing its
stake in biologics.
Another issue that companies may have to deal with over the next several years is
whether there is going to be more emphasis on cost effectiveness or value-added to a new drug.
Are drugs that are really innovative going to have the advantage over just the follow-on
products? Many companies are exploring that and trying to understand how much emphasis is
going to be put on that as new drugs go through the FDA and then look for reimbursement
approval.
The merger (reverse merger) between Merck & Co., Inc. and Schering-Plough
Corporation started when Schering-Plough acquired Merck. The acquiring company renamed the
acquired entity, Merck Sharp & Dohme. The parent company was then renamed Merck & Co.,
Inc. A large component of this merger is an expanded product portfolio but the combination
company now has a broader pipeline and an expanded geographic presence including being
positioned to expand to key emerging markets. Before the merger, Schering-Plough generated
the greatest portion of its revenues outside the U.S. (around 70% of total revenues). Merck’s
non-U.S. sales between 2007 and 2009 accounted for between 40% and 50% of total sales.

Three: Trends
43
Over the past few years, several large pharmaceutical manufacturers have announced
restructuring programs including significant alterations to R&D operations. Some of the new
programs included outsourcing research and development or externalizing R&D. It can be cost-
effective to purchase drugs in late stages of development or pick up small companies that have
competitive advantages in development technologies.
Some companies also purchase established businesses in emerging markets such as China
or Brazil. During times of economic instability, a boost from the purchase of established
products or the acquisition of leading development-stage products can help future development.
In an effort to be more efficient, AstraZeneca established restructuring programs

including plans to be more efficient in its R&D efforts. AstraZeneca has completed several
agreements to improve its development efforts. In 2010, the company signed a worldwide
licensing agreement with Rigel Pharmaceuticals for the global development and
commercialization of fostamatinib disodium (R788) an investigational product from Rigel
indicated for rheumatoid arthritis. Another agreement was signed with Dako Denmark A/S for
companion diagnostic tests for several of AstraZeneca’s oncology projects in development.
Sanofi has become very active in the biotechnology acquisition business, with the
highlight of the acquisition of Genzyme in April 2011. The company also acquired Topaz
Pharmaceuticals in October 2011 and completed several other acquisitions to improve its
position in the biotechnology sector.
Bristol-Myers Squibb has both large molecule (biologics) and small-molecule products
but it has announced it is moving towards biologic therapy development. In recent years it has
focused the business operations away from non-pharmaceuticals, and initiated certain licensing
agreements, acquisitions, and productivity goals. The Medical Imaging business was sold in
2008, along with ConvaTec (wound care and ostomy products). The company also divested its
Mead Johnson Nutritional business in December 2009.

Three: Trends
44
THE ROLE OF CONTRACT RESEARCH ORGANIZATIONS

Contract research organizations (CRO) are becoming more a player in the development
of new products. Pharmaceutical product development is increasingly complex and expensive.
Not only regulators, but political leaders, advocate groups, the media and the public pay close
attention to the practices of clinical trial sponsors and the outcomes of clinical trials. The legal
ramifications of clinical research efforts can be astonishing, even years after a product has
received regulatory approval, as has been seen with products such as Vioxx and others.
Meanwhile, the number of new products in the development pipeline is steadily

increasing, making the efficient use of available resources more important than ever. Even while
pharmaceutical companies are spending more on R&D, they are focusing internal efforts on core
research, pipeline development, product management, and marketing. As they recognize the
benefits of outsourcing clinical research efforts, the proportion of budgets used for CRO
contracts is on the rise.
This has lead to an increase in the scope of CRO’s activities. CROs are participating in
earlier drug-safety trials (Phase I) and managing more research efforts that take place after a
product’s regulatory approval (Phase IV). Contract research organizations operate on an
international scale, conducting trials in multiple locations in many different companies at once,
under the supervision of multiple regulatory bodies. The industry is adopting a complete
electronic information environment, gathering and reporting data through secure online channels.
Besides reducing errors, electronic tools speed information-gathering and reduce the need for
paper documentation. This has caused the pharmaceutical industry to take a good long look at the
CRO full-service model that has emerged. Smaller, niche companies are transforming or merging
into organizations that are less about niche offerings and more focused on offering a complete
range of services that are harnessed from the earliest stages of development through post
approval research.
One example of a leading CRO is Covance, Inc., It is headquartered in the U.S. but
operates in more than 60 countries and employs 12,000 personnel. The company's has reported a
number of trends that it believes will push the industry in the future including:
x Internal limitations on capacity or expertise (drug development firms)

Three: Trends
45
x Continued pressures to contain costs
x Growing competitive environment for early stage biotech compounds
x Need for faster development times to maximize patent protection
x Simultaneous research in multiple countries
x Stringent government regulation
Covance has continued to expand its place in the CRO marketplace through a number of
acquisitions and alliances. For example, in 2009 Covance acquired Merck & Co.'s gene
expression laboratory and entered a five-year contract for providing related services to Merck. A
separate agreement was entered with Eli Lilly for which Covance purchased Eli Lilly's
Greenfield, Indiana early development campus to provide drug development services for a 10-
year period totaling about $1.6 billion.
On the other hand, the CRO industry is not immune to the market recessions that have
impacted sponsor companies. It has had to react with restructuring initiatives that include
closing research centers or reducing staff.

C H A P T E R F O U R
GlaxoSmithKline Pipeline and

Market Analysis
OVERVIEW
Headquartered in London, GlaxoSmithKline is a healthcare company offering
pharmaceuticals, consumer products and vaccines. It is a research-based company with segments
in: respiratory, anti-viral, central nervous system, consumer health, cardiovascular and
urogenital, metabolic, antibacterial, oncology, vaccines, and others. Another segment is ViiV
Healthcare, a joint HIV product venture company with Pfizer, started in 2009. GlaxoSmithKline
has operations in 150 countries around the globe. There are 86 manufacturing locations and the
company's main research centers can be found in the U.K., U.S., Spain, China, and Belgium.
Table 4-1
GlaxoSmithKline Corporate Summary

Company Details Description
Company Type Public
Company Address 980 Great West Road
Brentford, TW8 9GS
Country United Kingdom
Phone 44-20-8047-5000
URL www.gsk.com
Employees 99,451
Fiscal Year End December 31
Source: Company Website

Four: GlaxoSmithKline
48
FINANCIAL PERFORMANCE AND INVESTMENTS

GlaxoSmithKline allots 15% of its revenues to research and development expenditures
which represents approximately $6 to $6.5 billion per year. New products were launched in
vaccines, cancer, HIV, and respiratory during fiscal 2013. The company also expects to increase
its consumer product portfolio in 2014 by around 30 brand extensions or new products.
Company sales in 2013 totaled $42 billion, a decrease of 1% from the previous year.
Table 4-2
GlaxoSmithKline: Total Company Revenue and Total R&D Spending 2007-

2013
(Millions)
Year Revenues R&D Expenses R&D Spending as

a % of Revenues
2007 $45,400 $6,500 14%
2008 $45,200 $6,500 14%
2009 $44,400 $6,200 14%
2010 $44,008 $6,144 14%
2011 $44,093 $6,298 14%
2012 $42,025 $6,309 15%
2013 $41,613 $6,159 15%
Source: GlaxoSmithKline

49
Figure 4-1
GlaxoSmithKline: Total Company Revenue and Total R&D Spending 2007-

2013
(Millions)
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2007 2008 2009 2010 2011 2012 2013
Revenues R&D Expenses

50
GEOGRAPHIC MARKET PARTICIPATION

The largest geographic markets for GlaxoSmithKline are the U.S., Europe, and emerging
markets/Asia-Pacific (EMAP). For fiscal 2013, consumer products, emerging markets and some
stabilization in established markets showed promise for the company as it looks to move more
products through to regulatory filing. No regional geographic performance was considerable
stronger than others but Europe provided the least growth for the year.
Figure 4-2
GlaxoSmithKline: Break-up of Sales by Region, 2013

(in percent)
Japan Other
7% 6%
United States
34%
EMAP*
25%
Europe
28%
*EMAP- Emerging Markets Asia Pacific

Source: Company Website

51
PHARMACEUTICAL BUSINESS PERFORMANCE

Total pharmaceutical sales reached $33.5 billion for GlaxoSmithKline in 2013. The
company's currently holds a commanding position in the infectious disease and
respiratory/inflammation segments, which account for 33% and 38%, respectively. Oncology is
a focus area for the company in research and development as sales in this segment account for
less than 5% of total pharmaceutical sales for GlaxoSmithKline. The company currently has 15
projects underway in the oncology sector, more than any other segment. This attention to
oncology is expected to improve GlaxoSmithKline's position in the segment by 2023. Newer
therapies such as Arzerra are continuing to show growth in major regions and several pipeline
projects are underway to expand the use of Arzerra.
In the respiratory and inflammation segment GlaxoSmithKline will face generic

competition for its leading product Advair/Seretide but will likely offset some of the declines
with other products in its portfolio and several promising developments in its pipeline.
Overall, GlaxoSmithKline is expected to show an increase in sales through 2023,

reaching an estimated value of $37.3 billion. In addition to the late development projects
currently underway as shown in the pipeline table below, there are several promising phase II
developments that are expected to move to advanced development within the next two to three
years.

52
Figure 4-3
GlaxoSmithKline: Pharmaceutical Business Performance, 2011-2013 and

Forecasted 2023
($millions)
50,000
37,310
40,000 35,729 33,900 33,469
30,000
20,000
10,000
0
2011 2012 2013 2023
Source: Company website

53
Figure 4-4
GlaxoSmithKline: Pharmaceutical Segment Sales 2011 through 2013 and

Forecasted 2023
2023
2013
2012
2011
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000

Sales in Millions
Cardiovascular/ Blood Neurotherapeutics

Infection Oncology
Respiratory/ Inflammation Other Drugs
Source: Company data; Kalorama Information

54
Leading Products
GlaxoSmithKline's leading product, Seretide/Advair, achieved revenues of nearly $8.3
billion in 2013, up from $8.0 billion in 2012. Other leading products offered by the company
with sales over $1 billion annually include Avodart, Flixotide/Flovent, Epzicom/Kivexa, and
Ventolin. The company also has several other well performing therapies including Augmentin,
Lovaza, Lamictal, Synflorix, and Rotarix.
Table 4-3
GlaxoSmithKline: Leading Pharmaceutical Products, 2013 Sales

(millions)
Product Sales
Seretide/Advair $8,280
Avodart 1,345
Flixotide/Flovent 1,250
Epzicom/Kivexa 1,198
Ventolin 1,008
Augmentin 989
Lovaza 917
Lamictal 874
Synflorix 636
Rotarix 589

55
LATE STAGE PIPELINE

GlaxoSmithKline provided an update to its pipeline in February 2013 outlining a total of
43 projects in late stages of development. The company reported 12 products in registration with
the remaining 31 programs in phase III. The company has invested heavily in its oncology
treatments, which currently accounts for 35% of all late project developments.
GlaxoSmithKline’s development pipeline consists of projects through the company’s

core development center as well as projects from its subsidiary Stiefel Laboratories and joint
venture ViiV Healthcare.
Table 4-4
GlaxoSmithKline: Late Stage Product Pipeline

Product Phase Indication
2696273† III Adenosine deaminase severe

combined immune deficiency
Albiglutide Registration Type 2 diabetes (U.S.)
Alitretinoin ‡ III Chronic hand eczema
Anoro (meclidinium Registration COPD

(573719) + vilanterol†)
Arzerra (ofatumumab)† III Chronic lymphocytic leukemia—first
line therapy and use in relapsed
patients
Arzerra (ofatumumab)† III Diffuse large B cell lymphoma
Arzerra (ofatumumab)† III Follicular lymphoma
Benlysta (belimumab) III Systemic lupus erythematosus
Benlysta (belimumab) III Vasculitis
Dabrafenib (2118436) Registration Metastatic melanoma
Darapladib† III Atherosclerosis
Dolutegravir + abacavir III HIV infections

sulphate + lamivudine҂
Continued next page

56
Table 4-4 (continued)
Dolutegravir҂ Registration HIV infections (U.S., E.U.)
Drisapersen (2402968)† III Duchenne muscular dystrophy
Duac low dose‡ Registration Acne vulgaris
Flu (pre-) pandemic H5N1 Registration Pre-pandemic & pandemic influenza

prophylaxis (vaccine)
Fluticasone furoate III Asthma
(685698)
Incruse (umeclidinium III COPD
(573719))
MAGE-A3† III Melanoma
MAGE-A3† III Non-small cell lung cancer
Mepolizumab III Severe asthma
Migalastat HCl† III Fabry disease
MMR III Measles, mumps, rubella prophylaxis
Mosquirix III Malaria prophylaxis (recombinant

vaccine)
Patrome (IPX066)† III Parkinson's disease
Promacta/Revolade Registration Severe aplastic anemia (U.S.)

(eltrombopag)
Relenza i.v. (zanamivir)† III Influenza
Relvar/Breo (vilanterol† + III COPD

fluticasone furoate -
685698)
Relvar/Breo (vilanterol† + Registration COPD
685698)
Relvar/Breo (vilanterol† + Registration Asthma (E.U.)
685698)
Sirukumab† III Rheumatoid arthritis
Trametinib (1120212)† Registration Metastatic melanoma
Continued next page

57
Table 4-4 (continued)
Trametinib (1120212)† + III Metastatic melanoma, adjuvant

dabrafenib therapy
Trametinib (1120212)† + Registration Metastatic melanoma (E.U.)
dabrafenib
Tyverb/Tykerb (lapatinib) III Breast cancer, adjuvant therapy
Tyverb/Tykerb (lapatinib) III Gastric cancer
Tyverb/Tykerb (lapatinib) III Head & neck squamous cell

carcinoma
Tyverb/Tykerb (lapitinib) Registration Metastatic breast cancer in
combination with trastuzumab (E.U.)
Vercirnon (1605786)† III Crohn’s disease
Vilanterol† III COPD
Votrient (pazopanib) III Ovarian cancer, maintenance therapy
Votrient (pazopanib) III Renal cell cancer, adjuvant therapy
Zoster† III Herpes zoster prevention (vaccine)

†in-license or third party
‡Stiefel division
҂ViiV Healthcare interest

58
Figure 4-5
GlaxoSmithKline: Late Stage Product Pipeline by Therapeutic

Comparing 2009, 2011 and 2013
Area
Other* 2013
2011
Respiratory/ 2009
Inflammation
Oncology
Infection
Neurotherapeutics
Cardiovascular/ Blood
0 2 4 6 8 10 12 14 16
Projects in Development
*other includes dermatology other than antifungals, fertility, diabetes, hormones, osteoporosis, renal disease, ocular treatments
other than infection, gastrointestinal and other areas not included in one of the primary general segments.

59
GROWTH STRATEGY
GlaxoSmithKline is focused on developing innovative medicines for patients around the
globe. Academic collaboration, partnerships, and internal development all play a part in its
strategy for advancing products to market. It has major research sites in the U.K., U.S., Spain,
China, and Belgium. In 2013, GlaxoSmithKline announced that it would invest over $300
million in manufacturing innovation at several of its U.K. manufacturing sites.
Developing new products and ways to treat conditions is a big part of the development
effort at GlaxoSmithKline. For example, the company established a venture capital fund to invest
in companies working on bioelectronic medicines. Bioelectronic medicines are therapies that use
electronic devices/signals to restore organ function or improve other biological processes.
In 2013, GlaxoSmithKline completed the divestment of its Arixtra and Fraxiparine

(anticoagulants) brands to the Aspen Group. It also sold its nutritional drink brands, Lucozade
and Ribena, to Suntory Beverage & Food Ltd.
GlaxoSmithKline acquired Okairos AG in 2013. Okairos is a development company

specializing in prophylactic vaccines platform technologies. GlaxoSmithKline will use this
acquisition to complement its existing vaccine technologies in an effort to launch advanced
technologies in preventative and therapeutic vaccines.
In 2012, GlaxoSmithKline acquired Human Genome Sciences (HGS). Founded in 1992,

HGS was an innovative biopharmaceutical company specializing in genetics as a base to develop
proteins and antibodies. The acquisition included HGS's portfolio and pipeline.
GlaxoSmithKline acquired 10 million shares of Theravance, Inc. in May 2012 which

increased its ownership to approximately 27% of outstanding capital stock at the time of the
transaction. Theravance is a biopharmaceutical company that markets Vibativ, a product for
infection. Other products are in development in respiratory conditions, bacterial infections,
CNS/pain, and gastrointestinal dysfunction.
Other 2012 acquisitions were completed for Toctino, a product for the treatment of severe
chronic hand eczema and Cellzome AG (proteomics). Cellzome was integrated into
GlaxoSmithKline's R&D group.

60
Table 4-5
Highlighted Corporate Developments

Corporate Timeline Products/Segments
Development/Acquisition
Okairos AG 2013 Vaccine platform and early stage
assets
Suntory Beverage & Food 2013 Nutritional drinks and
Ltd. and Aspen Group anticoagulants
divestments
Human Genome Sciences 2012 Genetics research/products
(HGS)
Basilea Pharmaceutica Ltd. 2012 Toctino
product acquisition
Theravance, Inc. share 2012 Various pharmaceuticals
purchase
Cellzome AG 2012 Proteomics technologies


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Glaxo Smith Kline Pipeline Analysis

GlaxoSmithKline: Pipeline Analysis has been prepared by Kalorama Information.

Author: Melissa Elder

Publication Date: June 2014

Copyright © 2014 Kalorama Information, LLC.

ONE: EXECUTIVE SUMMARY ..............................................................................1

TWO: INTRODUCTION ...........................................................................................1

THREE: TRENDS IN PHARMACEUTICAL RESEARCH AND

Copyright © 2014 Kalorama Information, LLC.

The Role of Contract Research Organizations ...............................................................44

FOUR: GLAXOSMITHKLINE PIPELINE AND MARKET ANALYSIS .........47

Copyright © 2014 Kalorama Information, LLC.

CHAPTER ON: EXECUTIVE SUMMARY.............................................................1

CHAPTER TWO: INTRODUCTION .......................................................................1

CHAPTER THREE: TRENDS IN PHARMACEUTICAL

Copyright © 2014 Kalorama Information, LLC.

CHAPTER FOUR: GLAXOSMITHKLINE PIPELINE

Copyright © 2014 Kalorama Information, LLC.

SCOPE AND METHODOLOGY

Copyright © 2014 Kalorama Information, LLC.

Global Pharmaceutical Market, 2011-2013 and Forecasted 2023

Source: Kalorama Information

Copyright © 2014 Kalorama Information, LLC.

GLAXO SMITH KLINE PERFORMANCE

In the respiratory and inflammation segment GlaxoSmithKline will face generic

Overall, GlaxoSmithKline is expected to show an increase in sales through 2023,

Copyright © 2014 Kalorama Information, LLC.

GLOBAL PHARMACEUTICAL MARKET

x Cardiovascular Disease and Blood Disorders

x Respiratory and Inflammation

Copyright © 2014 Kalorama Information, LLC.

Global Pharmaceutical Market by Therapeutic Area, 2011-2013 and

Source: Kalorama Information

Copyright © 2014 Kalorama Information, LLC.

TOP 25 PHARMACEUTICAL COMPANIES: AN OVERVIEW

Copyright © 2014 Kalorama Information, LLC.

Top Pharmaceutical Companies, 1-25 by 2013 Pharmaceutical Sales

Position Company Pharma Sales 2013

Source: Kalorama Information

Copyright © 2014 Kalorama Information, LLC.

Source: Kalorama Information

in whole or in any part, is strictly prohibited.

Copyright © 2014 Kalorama Information, LLC.

GLOBAL HEALTHCARE SPENDING

Copyright © 2014 Kalorama Information, LLC.

Total Healthcare Expenditures as a Percent of GDP by Country 2010 and

Country Total Health Expenditures as Percent of GDP

Copyright © 2014 Kalorama Information, LLC.

Total Healthcare Expenditures as a Percent of GDP by Country 2010 and

Copyright © 2014 Kalorama Information, LLC.

AGING POPULATION AND IMPACT ON PHARMACEUTICAL MARKETS

Copyright © 2014 Kalorama Information, LLC.

International Population Trend Age 65+

Year World Population 65+ Compound Annual

Source: U.S. Census Bureau International Database

Copyright © 2014 Kalorama Information, LLC.

International Population Trend Age 65+

World Population 65+

Source: U.S. Census Bureau International Database

Copyright © 2014 Kalorama Information, LLC.

United States Population Trend Age 65+

Year U.S. Population 65+ Compound Annual Growth

Source: U.S. Census Bureau International Database

2011, 2012 and 2013